Lessons%20Learned%20from%20Federal%20Prosecutions

1
Lessons Learned from Federal Prosecutions

• Michael K. Loucks
• First Assistant U.S. Attorney
• District of Massachusetts

2
Medicare/Medicaid Spending

• 2001 588 billion
• 2003 695.3 billion
• 2005 828.7 billion
• 2007 985.4 billion (projected)
• 2009 1,140.2 billion (projected)
• 1992 GAO report estimated fraud and abuse was as
  high as 10 of expenditures true???????

3
Financial Recoveries
1991 1995 856,600,000 125,300,000
1996 2000 3,602,040,076 349,000,000
2001 8/2006 9,362,622,955 1,254,091,556
13,821,263,731
Source Loucks and Lam, Prosecuting and
Defending Health Care Fraud Cases, 2006
Cumulative Supplement, Chapter 11 (BNABooks).
4

• Which sector is the worst one?
• Which company has been the greatest offender?
• Can any conclusions from the numbers fairly be
  drawn in answering any of these questions?

5
Mix

• 42.2 pharmaceutical products
• 26.8 hospitals
• 6.8 dialysis providers
• 6.1 laboratories
• 3.7 carriers/intermediaries
• 3.5 nursing homes
• 3.3 medical devices

6

• Schering-Plough four settlements
• 2002 500,000,000
• 2004 27,000,000
• 2004 345,469,482
• 2006 435,000,000
• Total 1,307,469,482

7

• Tenet hospitals six settlements
• 2002 29,000,000
• 2002 55,800,000
• 2002 17,000,000
• 2003 54,000,000
• 2004 22,500,000
• 2006 900,000,000
• Total 1,078,300,000

8

• HCA (Columbia HCA), 2 settlements
• 2000 840,000,000
• 2003 631,000,000
• Total 1,471,000,000
• Settlements with these three companies represent
  about 26 of total recovered

9

• 7, 500,000,000 or greater
• 4 in drug industry sector
• 3 in hospital sector
• 33, 100,000,000 or greater
• 16 in drug industry
• 5 in hospitals
• 4 in laboratories
• 2 in dialysis
• 2 in nursing homes
• 2 in carriers/intermediaries

10
Factors that affect enforcement

• Leads
• Whistleblowers
• Anonymous sources
• Audits
• Resources
• Agents
• AUSAs

11
Medical Device Industry

• Subject to same rules that govern manufacturing
  and marketing conduct in the pharmaceutical
  industry
• Food, Drug and Cosmetic Act
• Manufacturing process requirements
• Off-label promotion prohibitions
• Anti-kickback statute
• Typical health care fraud rules

12
Off-Label Promotion

• No free speech right to promote a device for an
  off-label use
• There is a tension between the exchange of
  reliable scientific data and information within
  the health care community and the statutory
  requirements that prohibit companies from
  promoting products for unapproved uses.
• Virginia Bd. Of Pharmacy v. Virginia Citizens
  Consumer Counil, inc., 425 U.S. 748, 765 (1976).

13
Off-Label Promotion

• Government has a substantial interest in the
  regulation of medical devices and in subjecting
  off-label uses to the FDAs evaluation process.
• Permitting defendants to engage in all forms
  of truthful, non-misleading promotion of
  off-label uses would severly frustrate the FDAs
  ability to evaluate the effectiveness of
  off-label uses.
• United States v. Caputo, 288 F. Supp. 2d 912
  (N.D.Ill. 2003).

14
Lessons Learned

• Monitor development of off-label sales
• Scrutinize incentive programs for risk that sales
  force will be pushing off-label uses
• Conduct compliance audits of sales force
  activities
• Evaluate marketing and promotional campaigns
  against the directions for use

15
The Importance of Doing it Right

• Pressures from
• Competitors on pricing, quality
• Customers on service, delivery, pricing
• QC on following the processes
• Regulatory affairs on following the rules
• What happens
• Cutting of corners
• Sloppiness, rushing can become criminal

16
United States v. Canova

• Transtelephonic cardiac pacemaker testing
• 30-30-30 second intervals testing of the
  pacemaker in three thirty second intervals
• Medicare paid on a per test basis
• Time requirements prevented acceleration of
  testing
• Vice President, Operations increased employee
  quotas from 32 to 40 per day

17
Testimony from Employees

• Former plant manager If we were far behind on
  target, John would be pretty animated what we
  were going to do to get close to being on target
• Technicians to meet quota, the last 30 second
  interval had to be cut to 10-15 seconds
• From predecessor, when told employees were out of
  compliance everyone had to be in compliance
  but nothing i.e., quotas could suffer.

18
Testimony from employees

• Another manager I told Canova that
  technicians were not performing the entire
  30-30-30 testing all the time.
• Another manager I told him Were not doing it
  period no ones doing it.
• After seeking an interpretation from a Medicare
  carrier employee that the last 30 seconds didnt
  mean 30 seconds, Canova and another employee
  decided on their own there was in fact a
  loophole that did not require a thirty second
  tape.

19
Lessons learned

• Are the normal processes being followed?
• Are there pressures to increase productivity,
  output that are unrealistic for the resources
  available?
• Are employees being told to stay in compliance
  and to meet production/sales demands that are not
  realistic for the resources at hand, or in light
  of the rules governing either production or
  sales?
• Has someone offered a novel or new or suddenly
  discovered justification?
• Is a manager ignoring warnings from subordinates?

20
The Next Five Years

• Expenditures will more than double
• Drug costs will continue to rise
• Device development will continue
• An increase in the marriage of drugs and devices
• An increase in the cost of rehabilitative care
• An increase in the competitiveness between drugs
  and devices

21
Federal Enforcement Type

• Substantial pending inventory of FCA cases
  involving pharmaceutical products
• Off label promotion allegations
• Medicaid pricing allegations
• Kickback allegations
• These will continue they will likely be joined
  by allegations regarding devices